Mayo v. American Fire & Cas. Co.

• Decision Date: 13 December 1972
• Docket Number: No. 67,67
• Citation: 282 N.C. 346,192 S.E.2d 828
• Court: North Carolina Supreme Court
• Parties: R. W. MAYO, Plaintiff, v. AMERICAN FIRE & CASUALTY COMPANY, Original Defendant, and Max G. Creech, Additional Party Defendant.

Page 828

192 S.E.2d 828

282 N.C. 346

R. W. MAYO, Plaintiff, v. AMERICAN FIRE & CASUALTY COMPANY, Original Defendant and Max G. Creech, Additional Party Defendant.

No. 67.

Supreme Court of North Carolina.

Dec. 13, 1972.

Robert A. Spence, Smithfield, for plaintiff appellant.

Teague, Johnson, Patterson, Dilthey & Clay by Ronald C. Dilthey, Raleigh, for American Fire and Casualty Co.

James A. Wellons, Jr., Smithfield, for defendant appellant Creech.

LAKE, Justice.

The plaintiff's alleged cause of action against Creech is for damages caused by Creech's negligence in failing to procure, for the benefit of the plaintiff, insurance coverage which Creech undertook to procure. It is well established in this State that, if an insurance agent or broker undertakes to procure for another insurance against a designated risk, the law imposes upon him the duty to use reasonable diligence to procure such insurance and holds him liable to the proposed insured for loss proximately caused by his negligent failure to do so. Wiles v. Mullinax (second appeal), 270 N.C. 661, 155 S.E.2d 246; Wiles v. Mullinax (first appeal), 267 N.C. 392, 148 S.E.2d 229; Bank v. Bryan, 240 N.C. 610, 83 S.E.2d 485; Meiselman v. Wicker, 224 N.C. 417, 30 S.E.2d 317; Case v. Ewbanks, 194 N.C. 775, 140 S.E. 709; Elam v. Realty Co., 182 N.C. 599, 109 S.E. 632, 18 A.L.R. 1210. See also: 43 Am.Jur.2d, Insurance, § 174; Annot., 29 A.L.R.2d 171, 175.

Conversely, if the agent or broker, in fact, procured the contemplated insurance coverage from a competent, solvent insurer, so that it was in effect at the time of the casualty against which the proposed insured sought coverage, he has performed his undertaking and is not liable to the insured thereon. Wiles v. Mullinax (third appeal), 275 N.C. 473, 168 S.E.2d 366; Case v. Ewbanks, supra; Milwaukee Bedding Co. v. Graebner, 182 Wis. 171, 196 N.W. 533. In the latter event, nothing else appearing, the agent or broker is not a party to the contract of insurance and is not liable thereon, irrespective of any default in the performance thereof by the insurer and irrespective of the insured's lack of success in an action against such defaulting insurer. Creech contends that he is not liable to the plaintiff in this action for the reason that he, as agent for American and on its behalf, entered into a binder agreement with the plaintiff, which was in effect at the time of the fire and offorded the plaintiff the insurance coverage which Creech undertook to provide.

A valid binder for fire insurance coverage may be oral or written. G.S. 58--177; Moore v. Electric Co., 264 N.C. 667, 142 S.E.2d 659; Lea v. Insurance Co., 168 N.C. 478, 84 S.E. 813. No specific form, or provision, is necessary to constitute a memorandum, or an oral communication, intended as a binder, a valid contract of insurance. Wiles v. Mullinax (second appeal), supra. It is not required that the writing, or oral communication, set forth all the terms of the contemplated contract of insurance. Distributing Corp. v. Indemnity Co., 224 N.C. 370, 30 S.E.2d 377. The provisions of the statutory standard fire insurance policy are read into a binder, whether oral or written. G.S. § 58--177; Wiles v. Mullinax (second appeal), supra; Lea v. Insurance Co., supra. An extension of credit to the insured for the premium does not destroy the validity of the binder. Lea v. Insurance Co., supra; Couch on Insurance, 2d Ed., § 14:29. Where the insured and the agent contemplated coverage effective immediately upon the making of the oral agreement, it is immaterial that they also contemplated a subsequent delivery of a written memorandum which did not occur until after the loss. See, Wiles v. Mullinax (second appeal), supra.

In Milwaukee Bedding Co. v. Graebner, supra, the facts were similar to those in the present case, except that there the agent handed to the contemplated insured a copy of her written notes concerning the terms of the policy which she was to prepare and deliver. The Supreme Court of Wisconsin said:

'It is a general rule that, where an application for insurance is made to an agent who represents several companies, no contract of insurance is engendered between the insured and any particular company until such company is designated by the agent. . . . But, where the company is selected by the agent, and in some manner designated as the company in which the insurance is to be written, a binding contract results. . . . In such case the agent becomes the agent of the insured for the purpose of selecting the company.' (Citations omitted throughout.)

In the present case the superior court found as a fact that Creech, having been requested by the plaintiff to insure his building and its contents in specified amounts, 'advised plaintiff that such property was now insured and that such insurance would be with the American Fire and Casualty Company.' This finding is fully supported by the evidence of the plaintiff himself. The parties having waived a trial by jury, this finding of fact by the Court, has the effect of a verdict of the jury and is conclusive on appeal. Knutton v. Cofield, 273 N.C. 355, 160 S.E.2d 29; Young v. Insurance Co., 267 N.C. 339, 148 S.E.2d 226; Everette v. Lumber Co., 250 N.C. 688, 110 S.E.2d 288; Insurance Co. v. Lambeth, 250 N.C. 1, 108 S.E.2d 36; Strong, N.C. Index 2d, Trial, § 58.

The notes prepared by Creech at the time of the conference with the plaintiff on 20 May 1969, the parties having stipulated the authenticity of a copy contained in the record on appeal, show the plaintiff's name, the name of American, the...